October 08, 2010

Daley's budget raids reserves but no tax hikes, aldermen say

Mayor Richard Daley wants to draw down more reserve funds, refinance city debt and tap once-sacred special taxing district funds to close a budget shortfall for next year now pegged at about $655 million, aldermen were told today.

The city also would continue to require employees to take unpaid days off of work, keep in place a hiring freeze and eliminate 280 jobs, aldermen said.

Several were briefed this morning on the 2011 budget proposal, to be formally presented to the full City Council by the mayor on Wednesday. It will be Daley's final budget proposal, because he’s not running for re-election, and how it is received remains to be seen.

“It’s a smoke and mirrors budget that is deceptive to the people of Chicago,” said Ald. Robert Fioretti, 2nd, who is gearing up for a run for mayor in February. “A large portion of the budget is filled with top heavy administration and fails to address the actual problems facing the city.”

But other aldermen noted that alternatives include raising gas and sales taxes or laying off more workers, all of which would not be palatable ahead of an election in which all 50 council seats also are on the ballot. They predicted the budget would be altered only at the margins.

By declaring $200 million in the city’s tax increment financing district funds as “surplus,” the mayor would pour up to $40 million into city coffers next year. The rest of the money would go to other local taxing districts, with about $100 million going to the cash-strapped Chicago Public Schools.

Tapping further into reserves could be risky business, as Fitch Ratings in August knocked down the city’s bond rating a notch, which will increase the city’s future borrowing costs. Fitch warned that the city’s bond rating could be further lowered if the city didn’t balance its budget or better fund its pension obligations.

Finance experts and watchdogs have criticized Daley for drawing down hundreds of millions of dollars in long-term reserves to make ends meet this year.

The council has until the end of the year to hold hearings and vote on a final budget package for 2011. Aldermen may be reluctant to tinker too much with Daley’s proposal, as it includes no new taxes or fees — always a political plus, particularly in an election year.

Some aldermen earlier this year spoke out against tapping part of the $1.2 billion in TIF district funds that weren’t already committed to specific projects. They expressed fear that needed projects in their wards that could be funded with TIF money won’t get done. But others wanted the city to declare $700 million as surplus.

In TIF districts, property taxes paid to local governments are frozen for up to 23 years, and any additional tax collections are used to build infrastructure that promotes economic development. Those additional funds can be declared surplus and given to the local governments.

Critics says the mayor has used the 159 TIF funds scattered across the city to help favored developers and pay for pet projects. Daley has consistently defended their use, noting they have been used to build schools, police stations and other facilities that benefit the city’s neighborhoods.

Not taken into account in the proposed budget is the cost of a U.S. Supreme Court decision that 1995 firefighters’ entry exams resulted in discrimination. That verdict is expected to cost the city between $45 million and $100 million.

All 50 aldermen on the Chicago City Council had to file paperwork earlier this year detailing their outside income and gifts. The Tribune took that ethics paperwork and posted the information here for you to see. You can search by ward number or alderman's last name.

The Cook County Assessor's office has put together lists of projected median property tax bills for all suburban towns and city neighborhoods. We've posted them for you to get a look at who's paying more and who's paying less.

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